Jaguar Global (NASDAQ:JGGC) has entered into a definitive agreement to combine with smart glass manufacturer GLAAM at an enterprise value of $309 million, or 14.7x its 2022 revenue.

Seoul-based GLAAM manufactures glass that doubles as a display for building exteriors to be used as space for marketing or other media.

The combined company is expected to trade on the Nasdaq once the deal is completed in the third quarter of 2023.

Transaction Overview

Jaguar Global has $244 million in its current trust and has not yet supplemented this with additional committed financing, but the deal also does not include a minimum cash condition.

The parties have not yet filed their merger documents, but Jaguar Global’s profile page will be updated once additional information is made available.

GLAAM shareholders are rolling 100% of their equity into the combined company, but they would only own 36.1% at close in an zero-redemption scenario. Jaguar Global shareholders would own 47.9% post-close in this scenario and the SPAC’s sponsor promote shares would convert to a 16% stake.

This would make for an unusually large sponsor stake. So far in 2023, SPACs reaching completion have seen an average of 97.4% of shares redeemed and in such a scenario, Jaguar Global’s promote shares would grow to a roughly 27% stake in the combined company if more outside equity capital were not arranged.

Quick Takes: The last SPAC dalliance with smart glass does not look as shiny, but as with many things, timing is everything.

CF Finance II completed a $1.6 billion deal with View (NASDAQ:VIEW) in March 2021 at a time when hopes were returning that the pandemic was waning and the general course of glass-and-steel office buildings would recommence apace.

View also urgently needed to show something for the billions in venture money it had soaked up through the years from Softbank, among others. Instead, it immediately slipped below $10 and hasn’t traded above $5 since November 2021, closing Wednesday at $0.58.

GLAAM, which is valued in this deal at more than double View’s current enterprise value, is differentiated in a number of ways. For one, it took its pandemic lumps but has waited to demonstrate its recovery before asking the public markets to believe.

GLAAM was profitable before COVID-19 hit with $9 million in EBITDA from $45 million in revenue and it did burn cash through 2020 and 2021. But, It was back to slender profitability with $1 million in EBITDA in 2022 out of $21 million in revenue. With building construction much closer to normalized now, it expects to experience a boost to $22 million in EBITDA in 2023E and $34 million in 2024E.

There is still a fair amount of ambition in those projections as those results would mean generating more than double the EBITDA margins at 44% and 48%, respectively, than it turned pre-pandemic at 20%.

Nonetheless, GLAAM has perhaps a stronger case to make for its recurring value-add. View’s pitch was that its self-tinting windows could improve building sustainability and lower utility costs over the years, while GLAAM expects to pull in significantly more revenue from running ads on its windows.

Helping its case is that its patented G-Glass is only about 34% more expensive than the LED bar technology it directly competes with in the market for media-displaying exterior glass. But LEDs eat up more power and maintenance to the point that GLAAM estimates G-Glass is more than five times cheaper over a 30-year run.

And, from installation onwards, the glass becomes a money-making asset. For a net investment of about $5.8 million to cover 12,000 square feet, GLAAM estimates its clients can potentially turn $1.9 million in annual ad revenue and sell media rights for about $7.3 million, making for a total $3.4 million profit, or 45% IRR over an 18-month period.

Those numbers are surely highly dependent on the location of each installation, but GLAAM has notched a series of high-profile deployments with more in its $1 billion pipeline. Of these, about $86 million are projects in advanced budgeting and blueprinting stages and $280 million-worth are in earlier talks.

The company has also de-risked the manufacturing part of its equation, with factories in Korea and China collectively capable of turning out 1.4 million square feet of G-Glass per year. But, its ability to meet construction demand isn’t the main question with its valuation in this deal.

More than 60% of its future revenue model is dependent on “maximizing digital content delivery opportunities”. Although it does not break down what revenues it has derived from advertising in its past financials, this appears to have small part of its business and not necessarily a core competency.

To mitigate this, it plans to roll out under a new Glass-as-a-Service model, under which it would split the cost of installing the G-Glass with building owners in exchange for GLAAM retaining 80% of the media and advertising revenue the installation brings in.

This is a win-win scenario for both sides, in theory. But it is one that decreases the upfront profits GLAAM will take in with each installation and even run the risk of going into the red on the deployment itself. From then on, GLAAM will still likely need to expend efforts to make sure each project’s marketing potential is reached, as their partner will be less incentivized to do so with only a 20% take in the ads.

Jaguar Global’s valuation of GLAAM at 13.8x its 2023E EBITDA is one certainly predicated on it figuring all that out. This is a premium to even the median trading multiples of established digital media and advertising peers as well as those in the IoT and smart products space.

GLAAM’s 2023 projections themselves include predicting that it will achieve 142% revenue growth and 2,200% EBITDA growth year-on-year, which makes for a shiny price tag indeed.

Click here for the full investor presentation.